Most investors are reacting to Wall Street's calamitous mood swings and careening prices with a semi- rational blend of shock, fear, bewilderment and panic. Financial headlines are replete with blood, yet seldom are heard Baron Rothschild's encouraging words: "Buy when there is blood in the streets."

Lulled into believing the serene markets of recent years were the rule rather than the exception, investors, particularly the highly leveraged and inexperienced, are reacting to the latest investment banking failure or hedge fund collapse with the earnest skittishness of lemmings. You can hardly blame them when Bear Stearns is worth $60 a share one week and being acquired by JPMorgan Chase & Co. the next for $2 a share.

"Two dollars doesn't even buy you a small popcorn at the theater," says Geoffrey Gerber of Twin Capital Management in McMurray.

Tuesday, when the Fed hacked another 0.75 percentage points off the benchmark federal funds, was a typical performance. The Dow Jones industrial average was up 300 points until the Fed acted in midafternoon. The index immediately gave up half of its advance, presumably because many investors were counting on a one percentage point reduction. But less than two hours later, the Dow finished up 420 points for the day, its biggest one-day point advance in five years.

The widely watched index took Good Friday off, closing Thursday at 12,361, up 3 percent for the week but down nearly 7 percent this year.

The tumult comes after more than three years of market calm and is characterized by days of triple-digit carnage followed by binges of bargain hunting by investors imbibing with a hair of the dog that bit them.

In short, the market's assessment of what a stock is worth is as ephemeral as the Pittsburgh Pirates' pennant hopes.

"There's a real lack of certainty about what the appropriate price is," says Colin Symons, chief investment officer of Symons Capital Management in Mt. Lebanon. "There's a heavy amount of institutional stress out there."

Phil Orlando, chief equity market strategist for Federated Investors, Downtown, calls it "one of the most volatile periods I can remember."

"Investors are just puking out their positions to get to safety as fast as they can," he says.

How volatile is it? In the calm conditions that prevailed from 2004 through 2006, there was only one day when there was larger than a 300-point gap between the daily high and daily low of the Dow. So far this year, there have been 40 days where the Dow's daily spread exceeded 300 points, including 17 days when it exceeded 400. The widest spread of more than 800 points occurred Jan. 23, the day after a surprise interest rate cut by the Federal Reserve generated a 659-point swing. The smallest gap was 225 points on Feb. 15.

By comparison, the average daily spread from 2004 through 2006 was 168, according to Mr. Gerber.

Since July, the daily spread of the Dow's daily high and low since July has averaged 2.3 percent of the previous day's close, vs. 1.6 percent in the prior three and a half years, Mr. Gerber says.

"There's clearly sentiment swings and overreaction to any piece of news, good or bad," he says.

Mr. Orlando believes the Dow's daily gyrations reflect a struggle between pessimism over current economic conditions and optimism that sooner or later the Fed's lower interest rates and Congress' stimulus checks will put the economy back on its feet. For the time being, pessimism has prevailed.

"Investors are still fearful of how bad, how deep, how long this recession will be. That's their focus point," he says. "The volatility in the marketplace will probably last a while longer until we get this shift in psychology."

His best guess is that turbulence will endure until the middle of this year, when many expect lower rates and the IRS rebate checks will begin lubricating the economy.

Greg Melvin, chief investment officer for C.S. McKee, Downtown, believes volatility won't be a short-term phenomenon. Given how highly leveraged Bear Stearns and other financial companies are, he expects it will take them more than a year to unwind their positions.

"Everybody's panicking on everything, not just financial stocks," he says.

Mr. Melvin, who is a man after Baron Rothschild's heart, takes more comfort in the volatility than most investors. He viewed the stable markets of recent years as "boring as it's ever been" and believes the capriciousness that characterizes Wall Street today presents a wonderful opportunity to buy cheap from investors who must sell for two reasons: to unwind their positions or because they are overwhelmed by panic.

He says he recently bought mortgages for the first time in eight years, Google after a 300-point slide, and troubled Cleveland banker National City for $7 a share.

"This is as fun as it gets in this business because there's a whole lot of people who don't know what they're doing," Mr. Melvin insists. "It's almost like stealing."

Do you need to be told to be careful out there?